Charges On UPI Transactions: MDR Fees On UPI Due To US Pressure? What GTRI Said

The new bill--taxation and other laws (Amendment)-- to amend the Payment and Settlement Systems Act 2007, which empowers banks and financial institutions to levy charges on UPI transactions and other electronic payment modes, was passed by the Lok Sabha. Meanwhile, GTRI believes that the move was brought in under US pressure and suggested India must not rewrite its UPI policies under US pressure.

The Indian think tank said that the nation must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem.

Zero MDR Is Growth Engine

Currently, banks and payment system providers cannot charge users directly or indirectly for specific payment methods such as UPI and Rupee debit cards.

GTRI says zero MDR has contributed significantly to this growth, allowing consumers, small shops, and roadside vendors to receive payments and receipts without transaction charges.

However, banks, National Payments Corporation of India (NPCI), and payment companies should invest in cyber security, fraud prevention, server development, dispute resolution, and system enhancement, it added.

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"A sustainable funding model may therefore be necessary. But financing the system does not automatically require a general merchant charge. Alternatives include targeted budgetary support, government incentives, charges on large commercial transactions, cross-subsidisation from financial services and narrowly designed fees applicable only to high-turnover merchants," it said.

Legislative Change Comes Under US Pressure: GTRI

GTRI claims the legislative changes also come against the backdrop of U.S. criticism of domestic digital-payment systems.

The U.S. Trade Representative’s 2026 National Trade Estimates report on foreign trade barriers criticised both Brazil’s Pix and India’s UPI and rupee frameworks.

"India must not rewrite its UPI policies under US pressure. It must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem," GTRI Founder Ajay Srivastava said.

India should also retain its payment-data localisation rules. Payment data are sensitive and commercially valuable. Keeping these data in India helps regulators investigate fraud, improve cybersecurity and protect national security, he said.

"India should not introduce MDR simply to address US trade complaints or protect the profits of Visa, Mastercard and other foreign payment companies," he noted.

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Any decision on charges should be based on the cost of running UPI and ensuring its long-term sustainability, he said, adding that American companies already have wide access to India's payment market.

(This story is written with inputs from PTI)